A mortgage can be difficult for contractors working in the construction industry. It can be hard to find a good deal even when you are in a very financial position, due to inconsistent earnings, tax deductions, and wary lenders.
While there is no ‘CIS mortgage’ specifically for you, you will be applying for a sole-trader/self-employed mortgage. However, the Construction Industry Scheme makes it much easier for subcontractors to navigate the process and receive a legitimate offer.
This article will cover everything you need about CIS mortgages – including how to apply, how to qualify, and how they work.
What is a CIS mortgage?
There are some issues with getting a mortgage if you’re self-employed. To calculate how much money you can borrow, most lenders will multiply your annual income by four. While this may vary from one lender to the next, it is a general rule.
After declaring for tax, your annual income will be calculated. You might also find yourself paying more for accounting for expenses. The CIS allows you to consider your gross turnover as your income. This is in contrast to the self-assessment documents submitted. If you are eligible for a CIS mortgage, you will likely be able to borrow significantly more than usual.
Who can apply for a CIS mortgage?
The CIS covers a wide range of construction work, including site preparation, decoration, and refurbishment. If you are a member of the following professions, you’ll be eligible for the CIS:
Site preparation – Laying foundations, etc.
Repairs & Alterations
Installation of heating, lighting, or power systems
Construction Follow-up (cleaning the inside of buildings after a project is completed)
Some work is exempted from the CIS. However,
Hire Scaffolding (without labor).
Non-construction site work (canteen work, etc. )
Architecture and survey
Material manufacturing for construction
These rules are not perfect. For example, an architect may also help with manual building work. They would be covered under the CIS because they are working in both groups.
It can be difficult to know if you are eligible for a CIS mortgage. It is a good idea to speak with experts who can help you determine if you are eligible and what amount you can borrow.
What are the benefits of a CIS mortgage?
CIS mortgages work well for construction workers with less than three years of experience or who have reported a low tax return.
- Increase your mortgage ceiling
- You might be able to get a much larger mortgage by applying for a CIS mortgage.
- One year vs. Three years of accounts
Many lenders will require 3 years of accounts for contractors and self-employed individuals. This can cause a lot of frustration and can delay your mortgage application. A CIS mortgage will usually require you to only show your gross income for the past 12 months.
Deposits in CIS Mortgages
While a CIS mortgage may not be anything extraordinary, it is still a regular mortgage. The only difference is that your gross income will be considered. The minimum deposit required for a mortgage is the same as for any other mortgage.